The numbers don't lie: Contractors face greater debarment-suspension risk

Two recent reports throw a bright light on the more aggressive stance agencies are taking on suspension and debarment proceedings. And contractors had better take heed.

According to a new Government Accountability Office report, suspension and debarment actions more than doubled in the past five years, from 1,836 in fiscal 2009 to 4,812 in fiscal 2013.

The GAO pulled its data from a recent report by the Interagency Suspension and Debarment Committee, which reported the same numbers. The committee was formed by an executive order signed by President Reagan in 1986.

The charts below show the steady upward climb of suspensions, proposed debarments and debarments from 2009 though 2013.

So, are contractors twice as corrupt today as they were in 2009? Not quite.

Since 2011, the Office of Management and Budget and the Interagency Suspension and Debarment Committee have been working together to improve suspension and debarment processes and efforts.

The committee has been promoting best practices and mentoring and training. Agencies also have increased staffing, better defining roles and responsibilities, and some agencies have consolidated suspension and debarment functions into one office, GAO said in its report.

So, the uptick looks like better enforcement, not worse behavior.

The committee report describes actions by multiple agencies.

For example, the Air Force has tried to enhance what the committee calls “transparency and due process” through the use of tools such as requests for information, show cause letters and terminations with conditions. A termination with conditions is an administrative agreement that allows a company to do business with the government as long its meets certain conditions.

Between fiscal 2012 and 2013, the number of show cause letters issued by the Air Force soared from 15 to 45.

The State Department created processes in 2012 to track referrals and follow-up activities. The department’s suspension and debarment office now meets quarterly with the State’s office of the inspector general.

The result: Suspension and debarment activities went from 50 in 2012 to 96 in 2013. The 50 in 2012 was more than the number of actions taken the previous three years combined, according to the committee report.

The committee told GAO that the increase they are seeing is because of more management attention from agency leadership, guidance from OMB and more support to the agencies from the committee. The committee, for example, will play a coordinator role if multiple agencies are investigating the same person or company.

OMB also directed agencies in early fiscal 2012 to appoint a senior official responsible for suspension and debarments and assess the resources available to the agency.

Interestingly, GAO is making any recommendations in this report. A 51-page report in 2011 found that the agencies evaluated didn’t have “the characteristics associated with active suspension and debarment programs.” But many of the recommendations made in that report such as assigning dedicated staffing and improving implementation guidance seem to have been successfully put in place.

So, where does that leave contractors?

The simple, straight-forward advice from Robert Tompkins, a partner with the Holland & Knight law firm, is that when you get an atypical call from the government, take it seriously and be proactive.

“There is a lot more collaboration between the various investigative and enforcement components, and the suspension and debarment offices are now part of the mix,” he said.

So, when the government calls about a potential violation, you need to act. "You want to make sure to correct any deficiencies and take a look at your operations," Tompkins said.

If internal controls or procedures need to be enhanced, do it. "The government views those actions favorably, so be an open book and be upfront and honest about what's happened, what you've done about it and what you are going to do about it," he said. "That's generally the right approach to head off a potential action."

It's deadly serious particularly for smaller companies that don't have the same resources that larger companies do.

"It can be a death sentence," Tompkins said, because a suspension or debarment cuts a company off from its customers. And even though it is a civil action, "it can be worse than a criminal fine."